It can be tempting sometimes to take a profit; however, it can be more foolish to cash in your chips too early.
Unlike other investment assets, property values are underpinned by a principle that the others can never match, land – they don’t make it any more!
Making money from property is two-fold; it earns a good income and it provides significant capital gains.
Many of our property investors have been with us for years, decades even, and their capital gains are substantial. But capital gains don’t have to be cashed in to be realised.
Rather than sell out, pay the CGT and look for something else -often with a higher risk or a lower return. It makes good sense to borrow against the gains and invest in another property.
To help with diversification, I often suggest a different real estate market. Our cities are frequently in different stages of the economic cycle and these supply and demand trends provide a handy diversification buffer.
While it’s tough to find a “good buy” at the moment, there are still great purchases to be made – they are just a lot harder to find.
In Melbourne, for example, I would look at 15 properties on my short list before I found one that meets all the requirements. In Sydney, it’s about one in every seven, while in Brisbane it’s one out of four.
Regional cities also have different dynamics and economies compared with their capital city cousins. The short list in these areas is often greater and the success rate is usually the highest.
Sticking with a good thing is, well…a good thing.
Until next week